Monday, November 17, 2008

Summary 2008 WY 134

Summary of Decision issued November 14, 2008

Summaries are prepared by Law Librarians and are not official statements of the Wyoming Supreme Court.

Case Name: City of Gillette v. Hladky Construction, Inc.

Citation: 2008 WY 134

Docket Number: S-07-0291, S-07-0292, S-07-0293

Appeal from the District Court of Campbell County, the Honorable Dan Spangler, Judge, Retired.

Representing Appellant Gillette: Raymond B. Hunkins and Amanda Hunkins Newton of Jones, Vines & Hunkins, Wheatland, Wyoming.

Representing Appellee Hladky: Patrick Murphy of Williams, Porter, Day & Neville, PC, Casper, Wyoming; Tad T. Daly of Daly Law Associates, PC, Gillette, Wyoming.

Facts/Discussion: A jury awarded Hladky Construction, Inc. (HCI) damages in the amount of $1,125,436.77 against the City of Gillette for breach of the implied covenant of good faith and fair dealing. The district court entered judgment on the verdict and subsequently, awarded HCI attorney fees and costs pursuant to the parties’ contract.

Sufficiency of the Notice of Claim: HCI’s notice of claim included over three pages describing in detail the time, place and circumstances of the alleged loss. With respect to the amount of compensation demanded, the notice of claim referenced Exhibit K which was a one page document that itemized the $1,300,016.57 in damages claimed by HCI. The notice clearly set forth the conduct giving rise to HCI’s claims citing the City’s action in changing the project specifications and the City’s subsequent inaction in the face of HCI’s efforts to keep the project on schedule.
Recovery for Breach of the Implied Covenant of Good Faith and Fair Dealing:
A breach of the implied covenant occurs when a party interferes or fails to cooperate in the other party’s performance. There was evidence in the record tending to show the City breached the implied covenant when it went along with an oral modification of a contract specification. The evidence also permitted a reasonable inference that the City breached when it did not act on HCI’s change order request until after a scheduled deadline had passed. The evidence permitted more than one reasonable inference and the inferences favorable to the City were subject to doubt. Thus the issue was for the jury to decide and the district court properly denied the motion for judgment as a matter of law.
Recovery of Delay Damages:
The City claimed the exclusive remedy for delay under the contract was an extension of time. HCI contended the contract allowed the contractor to recover money damages. The provisions at issue are part of the general conditions of construction contracts published by the AIA. The Court has adhered to the principle that remedies provided in a contract are generally not exclusive. The Court noted Dewey and Walters involved disputes about whether the remedies of damages and specific performance were available under the respective contracts. The Court held that the clause in question was not a “no damage for delay” clause and did not preclude HCI from recovering damages.
The total cost method compares the actual costs incurred, plus profit, to the bid amount and seeks the difference. The preferred method of calculating breach of contract damages under Wyoming law is to itemize the extra costs directly caused by the breach. However use of the total cost method is permissible if the breach substantially affected performance and the contractor proves the requisite elements. Based upon the record, the district court properly denied the City’s motion for judgment as a matter of law.
The Court next reviewed City’s claim of error of failure to instruct the jury on the total cost method in the damage instructions. Given the evidence, the Court concluded the jury had much more to consider than the actual costs incurred, plus profit, as compared to the bid amount. The information presented was sufficient to support a strong inference that the City caused it substantial actual harm and to enable the jury to form a reasonable estimate of the extent of that harm.

Change Order as Accord and Satisfaction or Waiver:
For the change order to operate as an accord and satisfaction, it must clearly have appeared that HCI intended it to operate as such and that the City either expressly agreed to it, or was bound to know of HCI’s intention at the time it accepted the change order. There was documentation in the record suggesting that rather than intending to waive or release any claim for damages, HCI intended to keep track of the additional costs resulting from the delay for payment by the City. The Court agreed with the district court’s conclusion that the change order did not contain language supporting the defenses of waiver or accord and satisfaction.
Evidence and Jury Instructions on Contract Claim Requirements:

The evidence raised a reasonable inference that HCI first recognized the condition giving rise to its claim within the meaning of Article 4.3.2 of the contract only after Mr. Hladky had successfully exhausted efforts to prevent delay damages. Viewing the evidence, the Court concluded that the 21 days began to run in mid-October. Thus, HCI’s October 31, 2000 letter met the requirements. HCI was not required to provide an estimate of the cost and effect of the delay for a damages claim.
The City cited to no authority on the issue of whether a court is required to instruct the jury that contract provisions are mandatory. The contract claims provisions were presented to the jury, testimony was presented and the parties had a full opportunity to argue the impact of those provisions. The contract provisions were sufficiently presented to the jury for consideration without specific instruction from the court concerning them.
The Court found no abuse of discretion in the district court’s rulings excluding testimony. The Court agreed with the district court that more of the same would not have produced a different result.

Attorney Fees:
Every contract imposes upon the parties a duty of good faith and fair dealing in its performance and enforcement. Upon prevailing on its claim that the City breached the covenant, HCI was entitled to recover reasonable attorney fees.
Upon the jury finding that the City breached the implied covenant contained in the contract, HCI was entitled to recover reasonable attorney fees. The district court did not err in ruling as a matter of law that HCI was not judicially estopped from seeking attorney fees.
The City argued that HCI was required to segregate its attorney fees between its successful and unsuccessful claims and should not have been awarded fees for its breach of contract claim. HCI’s breach of the implied covenant claim was inextricably entwined with its breach of contract claim. The Court could not say that counsel was engaged in distinct activities when pursuing one claim or the other.

Wyoming has adopted the two-factor federal lodestar test to determine the reasonableness of attorney fee awards. The test requires a determination of whether the fee charged represents the product of reasonable hours times a reasonable rate and other factors of discretionary application should be considered to adjust the fee upward or downward. The Court found no abuse of discretion in the district court’s determination that fees were appropriate for time incurred in preparing motions that it did not ultimately consider. Citing Snyder the district court concluded that legal research fees are recoverable as attorney fees but not as costs. The Court agreed.

Holding: HCI fully complied with the § 1-39-113 and Art. 16, § 7 of the Wyoming Constitution. Therefore the Court and the district court had subject matter jurisdiction to proceed with the matter presented. The district court properly denied the City’s motion for judgment as a matter of law on HCI’s claim for breach of the implied covenant of good faith and fair dealing. The City failed to meet its burden of proving prejudice resulted from the district court’s failure to instruct the jury concerning the requisite elements of the total cost method of calculating damages. The district court properly handled the contract claims procedures. As a matter of law, the January 2001, change order did not constitute an accord and satisfaction or a waiver of HCI’s claim for delay damages. The district court did not abuse its discretion in awarding attorney fees.


J. Kite delivered the decision.

Link: .

[SPECIAL NOTE: This opinion uses the "Universal Citation." It was given an "official" citation when it was issued. You should use this citation whenever you cite the opinion, with a P.3d parallel citation. Please note when you look at the opinion that all of the paragraphs are numbered. When you pinpoint cite to a quote, you should cite to this paragraph number rather than to any page number. If you need assistance in putting together a citation using the Universal Citation form, please contact the Wyoming State Law Library.]

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